Sustainability performance and earnings management - Evidence from the eurozone
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Keywords
Corporate Sustainability Performance ; Corporate Social Responsibility (CSR) ; Financial reporting quality ; Accrual-based earnings management ; Accruals quality ; Real earnings managementAbstract
The purpose of our thesis is to examine the impact of Corporate Sustainability Performance on earnings management from listed firms of the Eurozone. Motivation for our research is the observed trend from firms to incorporate and promote the principles of Corporate Social Responsibility (CSR) the last thirty years (Ioannou & Serafeim, 2015) in combination with the purposes inciting it. Based on past research, we desire to examine if the adoption of practices compatible with and supportive of sustainable development, contributes to transparency and increased disclosure or serves managerial opportunism.
For the construction of our model, regarding measuring earnings management, we make use of three methods, as well as variations of them: method of accrual-based earnings management under the models of Jones (1991), Dechow et al. (1995) and Kothari et al. (2005), method of measuring earnings quality through measuring the quality of accruals under the models of Dechow and Dichev (2002) and McNichols (2002), and finally, the method of real earnings management under the model of Roychowdhury (2006). For the measurement of Corporate Sustainability Performance, we consider the social and environmental dimension of the firm and define it on the basis of relative literature (Hummel & Ising, 2015; Lys et al., 2015; Manning et al., 2019). We also set parameters in our models including variables that have an impact on firm performance as well as variables associated with corporate sustainability issues. Our findings are strong and indicate that Corporate Sustainability Performance is negatively and statistically significantly linked to earnings management for all three methods of measuring it. From our results it can be inferred that the orientation in sustainable development from firms is accompanied by enhanced transparency, accountability to stakeholders and validity of public financial reporting.
For our research purposes, we used a sample of 3,090 listed companies from the Eurozone following IFRS at least for a year for the period between 2005 and 2020, concluding to 32,214 firm-year observations. Data were extracted from Databases Worldscope (accounting data), and Datastream and ESG Refinitiv (corporate sustainability data).
Postgraduate Studies Programme
Χρηματοοικονομική και Τραπεζική με ειδίκευση στη Χρηματοοικονομική και Τραπεζική ΔιοικητικήDepartment
Σχολή Χρηματοοικονομικής και Στατιστικής. Τμήμα Χρηματοοικονομικής και Τραπεζικής ΔιοικητικήςNumber of pages
84Language
English
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Αναφορά Δημιουργού-Μη Εμπορική Χρήση-Όχι Παράγωγα Έργα 3.0 Ελλάδα
Αναφορά Δημιουργού-Μη Εμπορική Χρήση-Όχι Παράγωγα Έργα 3.0 Ελλάδα